Brain-dead politics assures chaos till 2016

Commentary: No matter who wins, irrationality will rule markets

SAN LUIS OBISPO, Calif. (MarketWatch) — “Liberals and conservatives do not just see things differently. They are different, in their personalities, even their unconscious reactions to the world around them,” warns senior editor Emily Laber-Warren in Scientific American Mind, one of the more fascinating reports on behavioral-science research on the political brain.

Yes, conservative or liberal, Republican or Democrat, you can tell them apart from their DNA, brain scans, behavioral patterns ... seriously, guys like Eastwood, Trump and Romney don’t just “see” the world differently than Spielberg, Soros and Obama ... they are very different human beings from the outset. Yes, they see different, but they also think, decide, behave, vote and invest different.

How different? Here’s a simple test: Do you cheer loudly when a tough guy like Dirty Harry points his .357 Magnum, challenging the bad guy to “go ahead, make my day.” And did you feel relieved when the frazzled Dreyfus character in Spielberg’s “Close Encounters of The Third Kind,” marches up to the UFO to gets the hell off your great Earth?

In her “Calling a Truce in the Political Wars,” Laber-Warren elaborates on the differences between conservative and liberal thinking by paraphrasing humorist Dave Barry: “Republicans think of Democrats as godless, unpatriotic, Volvo-driving, France-loving, elitist latte guzzlers.” “Democrats dismiss Republicans as ignorant, Nascar-obsessed, gun-fondling religious fanatics.”

That’s why “Congress is in a perpetual stalemate because of the two parties’ inability to find middle ground on practically anything.”

No compromise till 2016: Will your retirement portfolio lose too?

OK, so you ask, what’s all this really mean for my investing strategies, now and especially after the November elections? Yes it depends on who wins: Will conservatives get absolute control of Washington? What if liberals hold onto the presidency and the Senate? Or if the conservatives add the Senate to their control of the house, but Obama is still president?

Remember the president has enormous power to appoint over 5,000 administrative positions, including the SEC and other regulatory agencies, plus the Fed chairman, as well as any Supreme Court and other federal court vacancies?

So, given your unique brain psychology, how will you invest successfully with four more years of irrational chaos when both parties get even more aggressive jockeying for the 2014 and then the 2016 races?

Yes, you got a helluva lot at stake folks: Should you invest in defense contractors? Conservatives want to increase spending on the Pentagon budget. Liberals want to cut back as our wars wind down, use the savings for social programs, highways.

How about Wall Street bank stocks? They’re betting on the conservative free-market agenda. And what if the Affordable Care Act program is reversed? And you get a voucher? Or buy more health-care insurers, hospitals, drug stocks now?

Yes, you bet your investment choices will be impacted by psychological “differences,” and big-time, no matter who wins the election.

Why your political brain has a huge impact in portfolio strategies

So let’s look at the new behavioral research, see if it increases our understanding of the “differences” between conservative and liberal thinking and their impact on your investing strategies. We found several fascinating differences in Scientific American Mind:

More wars ahead? A study by psychologist Michael Dodd and political scientist John Hibbing at the University of Nebraska “found that when viewing a collage of photographs, conservatives’ eyes unconsciously lingered 15% longer on repellent images, such as car wrecks and excrement — suggesting that conservatives are more attuned than liberals to assessing potential threats,” which might also be why they bet on the NRA and Pentagon.

Controlling or curious? In a study of the contents in the dorm rooms of 76 college students, researchers found “conservatives possessed more cleaning and organizational items, such as ironing boards and calendars, confirmation that they are orderly and self-disciplined. Liberals owned more books and travel-related memorabilia, which conforms with previous research suggesting that they are open and novelty-seeking.”

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